Food companies worth $152bn face high sustainability risk, says $6trn investor group

FAIRR’s Rosie Wardle tells Agri Investor the organization’s newly launched index could soon put private companies under scrutiny as well.

An index launched this week by the Farm Animal Investment Risk & Return initiative estimates that a majority of the companies of the $300 billion pool it scored face worryingly high sustainability risks.

Thirty six out of 60 meat, fish and dairy businesses, totaling $152 billion in market capitalization, were rated as “high risk” after being assessed on criteria ranging from greenhouse gas emissions and biodiversity loss to antibiotics use and water management.

Rosie Wardle, who leads investor engagement at FAIRR, told Agri Investor that the pool of companies surveyed represents about 20 percent of the entire food and ag universe, based on the group’s estimations. But she said blue-chip companies in other parts of the value chain were also exposed because they use suppliers designated as risky by the index.

Such was the case of McDonald’s and KFC, which respectively contract China’s Fujian Sunner and India’s Venky’s for part of their protein supply. The latter firms “aren’t only big in themselves but form the building block for the whole supply chain,” Wardle said.

Most concerning, she said, was the fact that so few companies report on health and environmental issues, such as antibiotics use and greenhouse gas emissions. “These are high-profile issues that aren’t being properly disclosed.”

Private concerns

FAIRR, an investor group backed by institutions managing $5.9 trillion, only looked at listed companies to compile the index, selecting the largest companies in the food and ag industry categories as defined by Bloomberg to come up with a shortlist of 60.

But Wardle said the group is considering extending its scrutiny to private companies. “There are very big private players as well, like Cargill, so we’re reassessing that going forward.” The index is meant to be revised quarterly, with the evaluation framework set to be updated on a yearly basis.

She argued sectors such as plant-based meat and dairy were well placed to benefit from an awakening. The latter, she said, currently represents 10 percent of the total dairy market; since plant-based meat only accounts for 0.25 percent of the overall meat market, she reckoned it had much room to grow.